Common risk factors in returns in Asian emerging stock markets

Shum, Wai Cheong; Tang, Gordon Y. N.

doi:10.1016/j.ibusrev.2005.09.001

Cited by 50 publications

(26 citation statements)

References 31 publications

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“…In the spirit of the three-factor CAPM model of Fama and French (1993) this work follows the recent work of Martinez et al (2005) and Shum and Tang (2005) by modifying the augmented factors to take account of size and liquidity effects that offer improved performance in capturing anomalies across the cross section of stock returns especially prevalent in emerging markets. Thus, in addition to market excess returns, the model is augmented by the excess returns attributed to size (SMB) and to illiquidity (ILLIQ).…”

Section: Empirical Model: Size and Liquidity Augmented Capmmentioning

confidence: 99%

Sector level cost of equity in African financial markets

Hearn¹,

Piesse²

2009

Emerging Markets Review

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This paper assesses the effectiveness of Liu (2006) metrics in measuring illiquidity within a multifactor CAPM pricing model. Costs of equity are estimated using this model for the major sectors within Africa's larger equity markets: Morocco, Tunisia, Egypt, Kenya, Nigeria, Zambia, Botswana and South Africa. In all countries, the cost of equity is found to be highest in the financial sector and lowest in the blue chip stocks of Tunisia, Morocco, Namibia and South Africa. At an aggregate level, Nigeria and Zambia have the highest cost of capital.

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Section: Empirical Model: Size and Liquidity Augmented Capmmentioning

confidence: 99%

Sector level cost of equity in African financial markets

Hearn¹,

Piesse²

2009

Emerging Markets Review

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“…While the additional liquidity factor offers strong performance in explaining the cross section of US stock returns the findings are in contradiction to the earlier findings of Pastor and Stambaugh as the liquidity premium solely subsumes the documented anomalies such as size and the book-to-market effects from Fama and French (1993). The applied literature using these liquidity measures has grown rapidly recently with studies relating to Africa (Hearn andPiesse, 2009a, 2010), South East Asia (Shum and Tang, 2005) and the Spanish stock market (Martinez et al, 2005). These studies found evidence supporting the continued use of both size and liquidity factors in valuation.…”

Section: Introductionmentioning

confidence: 99%

Modelling size and liquidity in North African industrial sectors

Hearn

2011

Emerging Markets Review

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This paper studies size and liquidity effects across North African industry portfolios using an augmented CAPM model with both linear and time varying coefficients. Furthermore this analysis is extended by the use of both regional as well as separate market universes for Algeria, Egypt, Morocco and Egypt to account for considerable segmentation. The evidence suggests that size and liquidity effects are prevalent in Egypt and Tunisia while time varying liquidity profiles suggest Egypt INTRODUCTIONThe application of standard asset pricing theory dictates that expected stock returns are related cross-sectionally to returns sensitivities to state variables that are themselves linked to investors overall welfare (Pastor and Stambaugh, 2003 However the presence of size effects is likely, especially within the smaller North African regional stock markets where the majority of listings arise either from occasional listings of major multinational enterprises (MNEs) and privatizations of state owned enterprises (SOEs) or from indigenous family-owned small and medium enterprises (SMEs). While small size firms are also likely to be highly illiquid there is likely to be a difference between the two effects due to strong liquidity preferences of investors. Consequently this empirical study investigates whether both size and liquidity effects are priced. As such I ask whether differences in cross sectional expected returns can be explained by fluctuations in aggregate market size and liquidity effects. Furthermore I extend this question in asking whether these size and liquidity effects vary over time.North African financial markets are at the forefront of the Maghreb regional development policy due to their potential role as a source of sustainable finance supporting industrial

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“…They find both size and B/M effects in all the markets and propose that the three-factor model suggests a narrow description of the average returns for these Asian markets over the 1990s. Shum and Tang (2005) inspect the application of the FF three-factor model in the Hong Kong, Singaporean, and Taiwanese markets and observe similar results to Drew and Veeraraghavan's (2003). There is very limited research regarding the role of momentum strategies in the Asia context.…”

Section: Literature Reviewmentioning

confidence: 69%

Functioning of Fama-French Three-Factor Model in Emerging Stock Markets: An Empirical Study on Chittagong Stock Exchange, Bangladesh

Chowdhury¹

2017

JFRM

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This paper attempts to test the functioning of Fama-French (FF) three-factor model at Chittagong Stock Exchange (CSE). The three factors include market risk premium, size risk and book to market risk. Nine portfolios are constructed by taking daily closing prices of thirty selective stocks of CSE from January 2010 to December 2014. Treasury bill rates of Bangladesh are used as a proxy for the risk-free rate. This study finds, stocks with small market capital outperform that of large market capital. It also observes that higher book to market ratio yields poor earnings. Although return at CSE is significantly influenced by rational size, it is weakly affected by value. Being a rumor driven and inefficient market, the FF model has positive but weaker explanatory capacity on stock returns at CSE.

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Common risk factors in returns in Asian emerging stock markets

Cited by 50 publications

References 31 publications

Sector level cost of equity in African financial markets

Sector level cost of equity in African financial markets

Modelling size and liquidity in North African industrial sectors

Functioning of Fama-French Three-Factor Model in Emerging Stock Markets: An Empirical Study on Chittagong Stock Exchange, Bangladesh

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